Transnationalization Process - International Economics

Transnationalization process

At the turn of the XIX and XX centuries. in the world there were firms which in the process of their development received the name in some cases "multinational corporations" (MNCs), and in others - transnational corporations (TNK) (Table 2.1).

Table 2.1 . Comparison of OLS and TNCs

Targeting in marketing

Organizational structure


Product Line Orientation



Investment Strategy


Different national markets





Functions are duplicated

Distributions by region of the world






Global Product Manufacturing

Unified division of labor

Concentration in certain regions of the world

■ A multinational corporation (MNC) is an enterprise whose activities are mainly geared towards different national markets or at least to different regions of the world.

For MNCs are typical:

- decentralized management - national or regional units have sufficient autonomy, independence from the head office;

- the multiplicity of production lines, each of which is oriented to a particular national market or region;

- the existence of mutually overlapping functions and excessive activity, since each division of the enterprise operates independently of other units.

■ Transnational corporation (TNC) - is geared towards the global market, or at least to a broad market that covers several national markets (several countries) or regions of the world.

Management in TNCs is much more centralized than in MNCs. The head office has much more direct control over the divisions. TNC produces global products or rather standardized products that can be sold in many markets, without requiring at all or requiring only a small degree of modification. Finally, the TNC develops, creating a unified division of labor on a large scale, by eliminating redundant functions (activities) and concentrating activities in those countries and regions and in those markets that offer the greatest benefits in performing this type of activity.

Obviously, all of the above refers to the ideal types. In fact, no single enterprise is an MNE or TNC for 100%, they only aspire to these forms in their development.

It should be noted that, despite all the listed differences, in the literature quite often the concepts of TNCs and MNCs are considered to be equivalent.

Currently, most MNCs are companies of American, European or Japanese origin. This process of multinationalization of firms is, to a large extent, a phenomenon inherent in developed countries: it is in developed countries that MNCs are born and it is in them that the head offices of companies are located. Moreover, MNCs control and strengthen the creation of foreign subsidiaries. New MNCs are emerging in rapidly developing countries such as Brazil, Mexico, India, Southeast Asia and Eastern Europe.

In recent decades, the role played by TNCs in the world economy is steadily increasing. The influence of TNCs is multifaceted.

■ The role of TNCs in the economy of one's own country and the host country should be viewed from two main points:

- Employment of the able-bodied population;

- the receipt of taxes in the country's budget.

■ With regard to the global economy, the TNC has an impact:

- for international trade;

- distribution of investments;

- the balance of payments of countries.

■ The role played by TNCs in technological development makes sense from the perspective of:

- technology transfer;

- transfer prices.

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